German lobby group regrets fall of exports to Russia

German exports to Russia could fall as much as 20-25% this year due to the effect of sanctions, a German business lobby group said yesterday (25 August), adding that confusion over the scope of sanctions was driving Russian customers away.

“While the export of whole machines is often unproblematic, the export of their component parts can sometimes suddenly pose problems, in case they are used militarily,” said chairman Eckhard Cordes.

European Union sanctions were imposed on Russia’s defence, oil and financial sectors over its support for rebels waging an insurrection in east Ukraine (see background).

“This uncertainty and increasing delays to deliveries are seeing Russia customers seeking alternative suppliers in their droves. We fear the transfer of large parts of our trade structure with Russia to Asia or South America,” he added.

Makers of components for escalators, mechanical diggers, pumps, agricultural machinery, drills or rails were particularly affected, according to a survey of committee members, the lobby group said in a statement.

Germany sold about €36 billion euros of goods to Russia last year, almost a third of the EU’s total, and some 6,200 German firms are active there with €20 billion of investment.

But despite active lobbying by German industry, Chancellor Angela Merkel has backed a hard line with Moscow, supporting the imposition of tougher economic sanctions by Brussels.

Germany’s closely watched Ifo business sentiment indicator fell for a fourth consecutive month on Monday, partly on concerns about how the Ukraine crisis and a stand-off with Russia would impact the German economy.

Background

Russia has escalated an economic battle set off by the crisis in Ukraine with a ban on all food imports from the United States and on fruit and vegetables from the European Union, dropping any pretence these might be for food safety reasons.

The import ban, signed by Russian President Vladimir Putin on 6 August, comes after he ordered retaliation for Western sanctions against Moscow. The decree halts or limits imports of agricultural products from countries that have imposed sanctions on Russia, ordering the government to come up with a list of imports to be banned for a year.

Russia is a major buyer of European fruit and vegetables but ranks 23rd among buyers of food from the United States, accounting for less than 1% of America's farm exports.